16 Sep 2012

Where does all the money go?

I find the best way to track your spending is to take on a simple 4 step process

First you must simplify - got 7 credit cards and 5 current accounts? You've got to stop  using them all, consolidate all your direct debits so they come from one current account. Got balances on all your credit cards? Put all bar the one with the best cashback rate (or other bonuses) in your sock draw. This then reduces the different places you can spend money from. Which leads to the next step.

Get them all signed up for online billing. If you haven't already you should be able to sign up to see your statements on a live basis. This means everytime you spend the statement will be updated in a couple of days.

Then log it all, spreadsheets help, there are various ones available here is good but I prefer my own one. It has a column for each day! Then subtotals for each month.

It may seem a bit anal to log every days expenses, but I've found it's the only way to really keep on top of everything. Once you start logging it day in day out, it becomes less of a chore, you'll hopefully find that you become more mindful over your spending as well. If you spend less, you don't have to put so much in the spreadsheet! Also I always feel a bit guilty when I log indulgences.

This process let's you compare month to month expenses along with everyday expenses, you pick up the daily coffees along with the yearly car expenses. This really lets you see the big picture and that's the whole point. You start seeing in black and white what you've done wrong (usually those daily coffees!). Or opportunities to save as I like to call them.

From this you can start making changes, you may find it difficult - but if you want to achieve those goals you've set out you have to make sacrifices. You'll soon notice the differnce, cut out those £3 a day coffee addiction, that's an extra £720 a year in your pocket - if that's the size of your overdraft or credit card balance it seems silly to keep supping away.

It's not just the small things though, don't forget to compare your car/home/life/pet insurances - current account interest %'s etc etc etc EVERY YEAR or more frequently!  It will really make a positive difference on how that spreadsheet looks. the bigger the positive number at the end the bigger the smile on your face will become.

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